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Amex EveryDay: A Question of Partners vs. Dilution

BAP_blog_3_17_imageI remember the day I received my first American Express card as the day I had arrived. The card and its gladiator icon represented status, accomplishment and all of the milestones to which I aspired.

Now American Express wants to offer that aspirational experience to a broader group of customers. It has recently announced an Amex EveryDay card that charges no fee, but still offers its holders access to Amex’s Membership Rewards program and its perks for making everyday purchases.

It apparently comes with high hopes. American Express said the EveryDay card represents its biggest debut, investment wise, since it launched its “Blue” brand in 2000. Ed Gilligan, president of American Express, told Bloomberg Businessweek the company is trying to engage new kinds of customers – mothers for example would receive incentives such as extra points for shopping at supermarkets.

Experts have described the move as a bid to broaden American Express’ customer base and redefine the brand, which has long held the status of an upscale luxury card. But the strategy raises the question of why? Doesn’t expanding the American Express pool introduce the risk of diluting the brand’s exclusive image? (I should note here that American Express also will offer a $95-a-year EveryDay Preferred card with higher reward rates.)

Then there is the question of timing. With the reconfiguration of the Delta SkyMiles rewards system to dollars from miles, won’t some American Express SkyMiles members decide they get more value from a no-fee card than the fee-based frequent flyer card? Perhaps this is a strategy on American Express’ part to capture any such departing members – it’s better than losing them to a competitor.

I guess the answer is in whether that risk is offset by the opportunity to expose American Express customers to a broader universe of partners. One of the card’s features is members who make 20 or more purchases in a billing period earn 20 percent extra points on all those purchases. That encourages lots of small purchases, which means customers will start using the card in places they otherwise would not have.

And that means American Express partners benefit, as will American Express. An added bonus: the card has a built-in EMV chip, which provides better security than a magnetic strip. After the recent rash of retail data compromises, this could be a selling point for members and partners.

Today’s American Express card might not look like my first, but I guess it is looking a lot more like the industry, and the consumer market, in which it competes.

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